Case Law Details
Addl. CIT Vs G.S. Pharmbutor P. Ltd. (ITAT Delhi)
It is undisputed fact that the assessee has not given any loan or advances during the year. As can be seen from the copy of account of M/s. Moderate Leasing & Capital Services Limited, assessee has been paying advances and loan to the said company from time to time and was also being repaid by the said company. All throughout, there were debit balances right from the assessment year 2006-07. In the FY 2011-12, the assessee has converted its debit balance of Rs.29.13 crores into convertible debentures on 30.04.2011 for a sum of Rs.28 crores. The said debentures were converted into equity shares on 25.03.2014 i.e. for the assessment year 2014-15. This amount was standing as opening balance to which AO has treated that the amount advanced of Rs.28 crores which was converted into convertible debentures from an advance given out of interest bearing funds. First of all, nowhere AO has analyzed as to when assessee had been advancing loan right from AY 2006-07 from out of any interest bearing funds or during the relevant year any further interest bearing funds have been diverted. Converting of debentures on 30.04.2011 out of debit balance with the said party cannot be treated as diversion of funds to the sister concern out of interest bearing funds for the year under consideration. As stated by the assessee, the long term borrowings were reduced to Rs.6.12 crores during the year. Thus, we do not find any reason as to why disallowance can be made on such a premise. Without going into the merit, whether interest free funds were available or not, we hold that under these facts and circumstances, no disallowance can be made. Accordingly, entire disallowance made by the AO is deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
Aforesaid appeal filed by the Revenue and the cross objection filed by the assessee are against the impugned order dated 30.08.2018 passed by the ld. CIT (A)-35, New Delhi for the quantum of assessment passed under section 143(3) read with section 147 of the Income-tax Act, 1961 (for short ‘the Act’) for the assessment year 2015-16.
2. The grounds of appeal raised by the Revenue read as under:-
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